While Apple dominated in the mobile market and is thriving with their line of laptops, they have never been able to grasp the home theater crowd with their video solutions, namely the first two revisions of the Apple TV (reviews here and here). Over three years from the release of the original Apple TV, Apple announced a new version of the Apple TV in combination with revisions of the iPod Touch and iPod Nano lines. This smaller, sleeker version of the Apple TV was priced considerably less than the MSRP of the original unit and the technology has changed dramatically. Along with the announcement of the Apple TV, Steve Jobs and company are taking a hard stance on standard pricing for content, very similar to their pricing decisions with music over iTunes. Television HD content is priced at 99 cents for a rental and new HD movies (available the same time DVD / Blu-ray hits stores) are priced at $4.99 for each rental. It’s an interesting move that some television / movie studios are resisting, mostly because they believe it devalues their shows / theatrical releases and will cannibalize sales on DVD and other mediums.

If you are familiar with the size of the previous Apple TV, you are going to be completely shocked when you see the packaging and start unboxing the new player. The player is no larger than a hockey puck and is easily the smallest media player on the market (even compared to the Roku player or the Western Digital HD player). The player is about 4 inches in length / width and stands less than an inch off your home theater entertainment rack. It’s a fourth of the size of the original Apple TV, thus placement of the new component is beyond simple. In fact, I placed the player on top of my Klipsch RC-64, matte black center speaker and had guests try to spot the Apple TV in the home theater setup. They were completely stumped! It blended in seamlessly with the home theater, something pretty fantastic for those lovers of minimalist home theater designs.

There’s very little in the box beyond the player, the aluminum remote and the power cord. The remote is a vast improvement from the original white plastic remote and feels more solid on your hand due to the increased length. It’s just as thin though; be careful losing it in the couch cushions. The remote has the familiar iPod dial design for navigation as well as a play / pause button and the menu button. On the back of the player, you will find the power jack, a mini-USB port, a Cat 5 network port for wired connections, a HDMI 1.4 port and an optical audio out for separate audio connections into your surround sound system. There’s no HDMI cable or optical cables included with the player, so those will need to be purchased separately (if you don’t already have them). The internal hardware uses the A4 1Ghz processor found in the speedy iPad, built-in 802.11N Wi-Fi , 8GB of internal flash memory for buffering / storing purchased content and 256MB of memory to handle menu operation / multitasking like playing audio in the background while navigating the menu. I’m guessing it also handles the nifty photo slide shows that pops up as a screen saver while it’s idle.

When you boot up the Apple TV for the first time, you are greeted with language selection as well as wireless network selection (if you aren’t hardwired in for Internet access) before launching into the menu. Similar to other Apple products, it’s a really simple process. One caveat to completely getting up and running is entering in your user name / password for both iTunes / Netflix. It’s a little time consuming to with the Apple TV remote, but thankfully you only have to do it once. If you own an iPhone or iPod Touch, you can use the Apple Remote application to control all the Apple TV functions and use the on screen keyboard for typing out the user name / password. It’s also extremely helpful for typing out search queries.

Thankfully, there’s no need for activating the Apple TV as an authorized device through the Netflix website, something that’s annoying on Blu-ray players and gaming consoles. The menu is deadly simple to navigate and definitely nicer to look at than the original Apple TV’s GUI due to the revolving box cover art loading at the top of the screen. It’s also extremely snappy bouncing in and out of the sub menus, even when loading all the box art (something that the previous Apple TV struggled with on occasion).

The menu has headings for Movies, Television, Internet (which includes services like Netlfix / YouTube), Computers and Settings. The Movie and Television categories highlight the most popular content, but you do have the ability to search. One nice inclusion from the last Apple TV is the ability to view new movie trailers for upcoming theatrical releases. You can also see previews of many movies / television episodes to get an idea if you would enjoy watching it. In the Computers setting, you can connect to your home network and stream content to the Apple TV (assuming it meets the limited format types) from both Macs and PCs. It’s unlikely that you will venture into the setting menu unless you are trouble shooting network problems, but there are plenty of audio / video tweaking options for those seeking a bit more control over quality.

As stated earlier, the Internet tab holds all the extras that Apple TV will roll out for connectivity to third party services. Currently, these include Netflix, YouTube, Flickr, iTunes Podcasts and Internet Radio. I’ve seen Netflix integration on about 10 devices at this point and this is easily the sleekest interface that I’ve come across. I was surprised that it blew away my previous favorite, the Xbox 360. You can pop into your Instant Queue or peruse content by arrival date / genre. Content box art flows across the screen and can be seen very easily from 15 feet away from the screen. You also have the ability to search Netflix’s content library, a great addition for those that don’t want to switch back to their laptop to setup new selections in their Instant Queue. Obviously, it’s highly likely that you already own a device that streams Netflix into your home theater at this point, but the interface is vastly superior to other formats.